How to Invest In Marijuana Stocks

Marijuana, which goes by several names such as weed, herb, pot, grass, bud, ganja, Mary Jane etc., refers to the dried flowers of a herbaceous plant scientifically known as Cannabis Sativa. The Cannabis plant is a source of over 400 compounds, including 60 cannabinoids. Of the 60 cannabinoids, two in particular, namely delta-9-tetrahydrocannabinol, aka THC or dronabinol, and cannabidiol, are tested for medicinal uses.

Though marijuana has multifarious benefits such as being a source of industrial fibre, seed oil, food, recreation, medicine and spiritual moods, the societal stigma attached to marijuana consumption cannot be erased overnight.

Alan Brochstein’s 420 Investor is the go-to community for investors to learn, explore, and profit from the marijuana companies. The main goal of 420 Investor is to provide real-time, objective information about the top marijuana companies in the market in order to help investors capitalize on cannabis.

The stigma emanated from the prohibition that was enforced on cannabis in 1930s, with several negative stereotypes such as violence, madness and non-productivity linked with its usage.

However, with more and more people appreciating the medical value of marijuana, and the realization that it is safer than alcohol and some legal prescription drugs, the movement to legalize marijuana began gaining momentum.

As of now, 29 states and the District of Columbia have legalized medical marijuana use, although federally it is still an illegal commodity. Apart from these, some states (18 of them) have limited the use of marijuana to the non-psychoactive marijuana extract called cannabidiol, or CBD.

Certain other states have laws that require doctors to prescribe marijuana. Meanwhile, eight states have currently legalized recreational marijuana use.

Even as marijuana is going through the process of mainstream acceptance, the investment community has moved in to capitalize on the development.

Arcview Market Research, which claims to be the top Cannabis Market Research company, said in its fourth edition of The State of Legal Marijuana Markets’ report, that legal marijuana sales were expected to have grown 25 percent in 2016 to $6.7 billion. By 2020, sales could clock $21.8 billion.

Meanwhile, legalizing recreational marijuana is expected to give a shot in the arm for the industry. Colorado, which has legalized recreational marijuana in 2012, is now clocking weed sales of about $1 billion per year.

With so much clamor around it, the shrewd investment community is not the one to let the opportunity slip by.

Marijuana Stock Investing

With the risk appetite of investors forever on the rise, they are always on the lookout for high return assets. Marijuana stocks make the cut, given the increasing acceptance of the weed among the general public and the huge market opportunity before the marijuana companies.

Ally Invest offers an excellent platform to trade stocks, and at a price point that makes sense. Through TradeKing, they also have comprehensive research reports which are vital for investing in the Cannabis industry.

The marijuana market currently comprises several smaller players with limited market share. Therefore, most of them aren’t big enough to trade on the main exchanges and instead trade on the shady over-the-counter exchanges or is backed by venture capital funds. Fairly protected from tough regulatory scrutiny due to the leeway for little to very little financial disclosure norms, some of them threaten to take investors for a ride.

Pump-and-dump operators fleece investors by artificially inflating stocks and then dumping them after making staggering profits.

Even if these are genuine companies, most of them are required to plough back all, and sometimes, even more than what they earn into the business. Therefore, they aren’t generally profitable for years together.

Why Invest In Marijuana Stocks?

The U.S. Marijuana Index, which has been in existence since January 2015, has been fairly volatile, which is the perfect recipe for a high risk-high return scenario. From a high of 126.98 in mid-January 2015, the index fell steadily over a year, reaching a bottom in mid-February of 2016.

After a small rebound and a consolidation move until August 2016, the index saw a pre-presidential-election run up on hopes of more states legalizing the weed. The index hit a high of 110.64 in late October 2016. Subsequently, it experienced a pullback and has currently settled around a support around 50.

The index is a compilation of the leading cannabis stocks operating in the U.S. Apart from the basic norm of the constituent companies having a business strategy focused on the marijuana industry, these stocks have to meet minimum trading criteria such as

Minimum market capitalization of $30 million

Daily trading volume of $600,000

Stock price that is at least 10 cents

Companies having revenues of over $5 million per year are exempt from these listing standards.